After the apparent bursting of the initial coin offering (ICO) bubble, startups have been struggling to raise funds through the crypto or token model of token/coin offerings as investor interest dwindled and price problems continued. That is, until 2019 introduced the concept of initial exchange offerings (IEOs).
Retail investors have warmed up to the idea of buying tokens for a project that has already been assessed by a trusted entity, in this case cryptocurrency exchanges, believing that the likelihood of getting scammed by a project is far less if the project has been approved by an exchange.
As reported by Bloomberg, crypto analytics firm CoinSchedule has recorded 23 such offerings already since February 2019, raising a total of USD 180 million. Bittrex CEO Bill Shihara, whose own platform launched its first IEO this month, selling out in under 1 minute, spoke in positive terms of the new concept:
“It [IEO] has the potential to be larger than the ICOs of 2017. We are seeing significant demand both from our users and token teams.”
However, not everyone is viewing this with positive eyes. Zach Fallon, a securities lawyer who worked on ICO-related issues at the US Securities and Exchange Commission until last year, makes a brutal assessment that IEOs “take everything from an ICO and make it worse”. He believes that IEOs are still exposing investors to the risk of fraud because the vetting processes are not transparent nor standardized.
ICOs have not yet died completely. CoinSchedule shows that ICOs have raised USD208 million, only slightly more than IEOs in their early stages of discovery.
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